Wednesday, 8 February 2017

The pound rises against the dollar. Exchange rate back over $1.25.

Good morning,

What a difference a day makes......After falling to a two week low of $1.2349 yesterday, the GBP/USD cross is now trading back over $1.25 with the currency pair hitting $1.2540 on Tuesday evening.

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As you can see from the graph below, the pound/dollar exchange rate has risen over one per cent in the past twenty-four hours after investors were given some much needed confidence.

GBP/USD graph.


Why is the pound rising?

There were two announcements yesterday which helped boost the value of the pound. Kristen Forbes, a member of the Bank of England's Monetary Policy Committee, gave a speech yesterday afternoon and hinted that she is on the verge of voting for an interest rate hike.

Ms Forbes stated the robust performance of the UK economy since last year Brexit result had confirmed her hunch that Britain would see out the referendum better than many economists had predicted.

She was also quick to point out the risks of an inflation overshoot by saying "In my view, if the economy remains solid and the pickup in data continues, this could soon suggest an increase in the BoE benchmark rate".

Investors were also keen to take advantage of the mounting pressure on the UK government to give parliament a bigger say on the final deal to leave the EU.

Sterling jumped on comments made by junior Brexit Minister David Jones after he said that parliament would have a meaningful vote on any deal.

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